The prospect of heightened hostilities in Hamas-ruled Gaza cast a pall over a week of crucial diplomatic activity, including an international conference designed to drum up billions of dollars to rebuild the heavily damaged territory. With a new Israeli government to take office within weeks, however, it wasn't clear how sweeping any response would be.

More than 110 rockets and mortar shells have exploded in Israel in the six weeks since it ended its air and ground onslaught against Gaza, meant to end the rocket threat and stanch the flow of arms into Gaza. So far, Israel has responded to the rocket fire mainly with airstrikes targeting underground tunnels used to smuggle weapons and other goods into Gaza from Egypt.

Hamas wants Israel to end its blockade of Gaza, imposed after the Islamic militant group wrested control of the territory in June 2007, leaving moderate Palestinian President Mahmoud Abbas controlling only the West Bank. Israel says it won't end the blockade until Hamas releases an Israeli soldier captured nearly three years ago.

For three weeks beginning in late December, Israeli aircraft, tanks and artillery pounded Gaza, leveling buildings and sometimes entire streets. By the time the offensive ended, some 1,300 Palestinians — at least half of them civilians — were dead, Palestinian officials said. So, too, were 13 Israelis, including three civilians.

In declaring a Jan. 18 cease-fire, Olmert said the war had achieved its aims. But he also noted, "we took into account the possibility that shooting by the terrorist organizations might resume."

Did Gaza operation end too soon?
Many Israelis believe the Gaza operation ended too soon, most prominently hard-line Likud leader Benjamin Netanyahu, the incoming prime minister who is to replace Olmert within weeks. Netanyahu had no immediate comment on the Cabinet decision.

The prospect of renewed hostilities in Gaza came at the start of a week of intense diplomatic activity. In Egypt on Monday, the internationally recognized Palestinian Authority, led by Abbas, will ask some 80 donor countries to pledge $2.8 billion to rebuild Gaza.

Raising the money won't be the hard part: The U.S. is expected to pledge $900 million, and Saudi Arabia has promised to kick in $1 billion.

The problem will be getting the money into Gaza, a tiny seaside territory that is home to 1.4 million Palestinians. Many of the donors consider Hamas a terrorist organization and won't funnel money directly to its government. Hamas could sidestep that problem by agreeing to share power with bitter rival Abbas and soften its violent anti-Israel ideology. Repeated reconciliation efforts have failed, and no breakthroughs have emerged in ongoing talks in Egypt.

Translating donations into construction projects would also require Israel and Egypt to recognize Hamas' authority in Gaza and reopen sealed borders. But without a truce, Israel will continue to keep tight control over concrete, steel and other supplies needed to rebuild 15,000 homes, roads and other infrastructure.

High-profile foreign visitors
In the runup to the donors' conference, a string of high-profile foreign visitors have arrived in Gaza, indicating a new willingness on the part of the international community to become involved there.

International Mideast envoy Tony Blair toured the territory on Sunday, his first visit since appointed in 2007 to represent the Quartet of Mideast negotiators — the U.S., European Union, United Nations and Russia.

Without truce and reconciliation agreements in place, money for Gaza won't have the desired effect, Blair said.

"This money will not have a lasting impact unless there is a political solution," he said.

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